There's something about statistics that gets me energized, even on a weekday! I particularly enjoy comparing myself to others and understanding how I measure up. It's only natural to want to know if you're average or above average. This knowledge helps you gauge your position and serves as a valuable reminder of what the future may hold. As a financial planner, understanding retirement averages like these can truly assist both you and me in planning for the future.
So, let me share with you my thoughts on some intriguing figures I recently came across in a Wall Street Journal article titled Here’s What Retirement Looks Like in America in Six Charts (paywall).
Statistic #1: Retirement account savings
Let's start with retirement savings balances. For individuals age 65 and above, the average balance is $407,581, according to the Employee Benefit Research Institute. Only 17.3% of this age group have balances of $700,000 or more, with 11.6% having $1 million or more. Generally, the highest balances are seen among those age 55-64.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
My thoughts: To begin with, I wouldn't classify our clients as average. So, if you're reading this and feeling good about your situation, know that there's much more to it than these averages. Our clients are typically on the higher end of the spectrum since accumulating more wealth often leads to seeking professional assistance.
That being said, the right answer for you depends on your retirement needs. If you're an "average" investor in America, you can probably expect to withdraw around $20,000 per year before taxes. If your needs are greater, you'll likely require higher amounts. This statistic concerns me the most but doesn't come as a surprise. We have a savings issue in this country, so I'm not astonished to read these figures.
Statistic #2: Social Security benefits
Considering the previous statistics, it's no surprise that a significant portion of our population heavily relies on Social Security. About 90% of individuals claim their benefits by the age of 65, and the average benefit amount is $1,825 per month, according to the Social Security Administration.
My thoughts: Social Security is a substantial resource for retirees. Even with the average benefit, assuming both individuals in a couple worked, you can expect over $40,000 of retirement income from Social Security alone. If you're at the higher end of the spectrum, these figures can roughly double.
Remember, Social Security benefits are calculated based on your highest 35 years of earnings. This statistic also emphasizes the critical importance of working with someone to optimize your Social Security benefits. There are various factors to consider, such as when to start claiming, which can make a significant difference in your retirement plan.
Statistic #3: Health expenses
One of the most daunting concerns for retirees is healthcare expenses. According to the Bureau of Labor Statistics, individuals age 65 or older spend an average of $7,030 per year on healthcare. This number tends to increase as one gets older. The breakdown of this amount includes $4,974 on health insurance, $1,077 on medical services, $726 on medications and $253 on medical supplies.
My thoughts: As you can see, if you're married and retired, you're likely spending about $14,000 or more per year on healthcare expenses alone. Keep in mind that these figures represent averages, and if you anticipate having higher healthcare needs, you could easily be looking at allocating $20,000 or more annually for your health expenses.
The most important thing to acknowledge is that you shouldn't overlook these costs in your retirement planning. During our working years, we often don't pay close attention to healthcare costs since insurance coverage is typically provided through our jobs, and the rest may not be a significant concern year after year. However, in retirement, these costs become a major contributor to your budget.
Statistic #4: Average day for a retiree
This is, by far, my favorite statistic, from the U.S. Bureau of Labor Statistics American Time Use Survey, because I've never seen it broken down like this before. So, how does the average retiree spend a 24-hour day?
- 9.01 hours sleeping
- 6.24 hours of relaxation and leisure
- 4.5 hours watching TV
- 1.86 hours eating, drinking and grooming
- The rest is allocated to housework, caregiving, exercise and work.
My thoughts: Isn't this thought-provoking? You work for 40 years, only to retire and spend over half of your days sleeping or watching TV? Now, as someone who finds that idea delightful, it may sound like an amazing day to me. However, if you were to ask the average pre-retiree about their ideal retirement, it probably wouldn't involve watching a 30-minute show followed by the epic film Lawrence of Arabia (trust me, I did a seventh-grade history report on that movie, and I wouldn't wish it on anyone).
My takeaway from this study: Before retirement, start pursuing hobbies and passions that interest you. I've written about this in my retirement dating blog, but it's important to start exploring activities today to determine how you want to spend your golden years. If you do this, your retirement years will truly be golden.
How average are you?
Isn't it fun? The WSJ article includes a few other statistics, like average net worth ($1,217,700 for individuals age 65-74), but I thought the four statistics I highlighted above already painted an interesting picture. I hope you found them as fascinating as I did.
Diversified is a registered investment adviser, and the registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC.
A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.
Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified, LLC should not be a substitute for consulting a qualified tax advisor, accountant, or other professional concerning the application of tax law or an individual tax situation.
Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.
-
The 'Concerning Trends' in Retirement NowAmericans are less satisfied with their life in retirement and cite inflation and higher healthcare costs as just two of the problems they're facing.
-
What Trump Has Done With Social Security So FarSince President Trump was sworn into office on January 20, he has proposed or initiated changes impacting how Social Security functions, including closing offices and offering buyouts. Here's a roundup.
-
10 Tax Topics Every Retiree Should Know AboutA little knowledge can go a long way toward saving on your tax bill. Print this out and take it to your tax planner so you can have a productive chat.
-
Facing a Layoff? Ask Your Employer These Questions NowIf you're being laid off or forced into early retirement, don't make any decisions without proper guidance — and that starts by asking some key questions.
-
Have $1M+ Saved? Consider a Financial Planning One-Stop ShopA 'one-stop shop' team — including a financial planner, estate planning lawyer, CPA and more — could serve all of your tax, estate and retirement planning needs.
-
Five Ways to Safeguard Your Portfolio in Market DownturnsThe stock market is nothing if not volatile these days. When it takes a dip, a well-managed, properly diversified portfolio could help you ride out the storm.
-
This Underused IRA Option Offers Tax Benefits and Income SecurityLooking to avoid running out of money in retirement? Consider longevity protection provided by a QLAC as a component of your retirement income plan.
-
These Four Books Explore How to Leverage Our Outrage PositivelyThe authors offer some powerful tools to help us find solutions to discord rather than remaining silent or blowing up in anger.
-
Financial Pitfalls to Avoid in Your 30s, 40s and 50sAs you pass through each decade of working life and build wealth for retirement, watch out for the financial traps that can hinder your progress.
-
Five Key Retirement Challenges (and How to Face Them Head On)Life will inevitably throw challenges at you as you get older. But making a flexible retirement plan — and monitoring it regularly — can help you overcome them.
